From the BBC:
On the planned council tax freeze, which it is thought could save the average family up to £72, Mr Osborne will say: "I wanted to help families and pensioners with the daily cost of living."...
But shadow Treasury minister Chris Leslie said: "Out-of-touch ministers don't seem to understand that people are struggling with rising prices and energy bills now, but this policy means no help for another six months. It would mean just £72 for a typical household, which is a fraction of the extra £450 a year the Tory VAT rise alone is costing a couple with children."
I dunno. Do people really fall for this: we'll knock £1 bn off an in-your-face tax and increase stealth taxes on the real economy (VAT, National Insurance) by £20 billion and hope that nobody notices?
Monday 3 October 2011
Do people still fall for this?
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26 comments:
Personally I don't believe either of the lying feckers; one's offering a glass of whisky and a loaded revolver in the library, whilst the other is offering a long slow strangulation.
I get the impression most notice and are either are annoyed or angry but they don't know what to do about it because they feel they are impotent.
The vote is becoming worthless if it isn't already.
Well VAT is a voluntary tax so no problem there. NI is obviously not but I have found that my net pay has not changed noticeably.
Council Tax is symbolic as you know only too well, partly because it gets directly debited from your account rather than "at source".
I don't agree with it, but it is probably good politics.
BB, for sure, Labour waffled on about Council Tax freezes as well and were not averse to hiking NIC and possibly VAT.
Bill, probably.
BE, how on earth is VAT voluntary? Try asking VAT-registered businesses whether they would rather have their supplies (or the onward supplies made by their customers) re-rated as exempt...
As long as you don't warm up any food and live in a tent VAT is "voluntary".
It's a bit like work is "voluntary" for slaves, just don't get captured.
AC1
AC1, tents are very much liable to VAT, the position with camp sites is trickier.
I think the confusion over VAT being "voluntary" comes from the fact that it's misinterpreted as a tax on consumption, not production. In order not to pay VAT you have to consume VAT-exempt goods only, but produce only VAT-exempt goods as well. Otherwise part of the VAT will be taken out of your wages, so to speak.
Also this means that you can't sell your goods to people who produce non-VAT-exempt goods because then you'll get a reduced sales revenue from the tax they're paying... so basically no you cannot escape VAT and for economists to call it "voluntary" is highly disingenuous.
RA, that's music to my ears, but we simply can't fight decades of brain washing.
When I ask the huddled masses what would happen to prices, profits, output, employment etc. if corporation tax paid by VAT able businesses (approx. £20 bn) were scrapped and VAT (approx. £100 bn) were simply hiked to (say) 24% they fail to accept that it would have little or no impact.
Or VAT-able businesses could simply set their prices as a net figure plus 20% for VAT and plus 4% for corporation tax and then remove the 4% from their turnover line and from their "tax paid" line. The masses reuse to accept that you cannot shift the economic indicidence of a tax with accounting trickery.
The more visible the tax, the more people notice it. Remember Hague taking a lead in the polls because he promised to lower the tax on fuel? I worked out that most families would save around £50/year. Brown's hit on pension dividends cost people far more.
VAT adds to prices, but it isn't so visible. It isn't even visible in a weekly shopping bill as those vary depending upon whether you need Lenor, buy a DVD, flowers whatever.
It's the other reasons I like less and simple taxes. If people really worked out how much of their wealth was being taken by government there would be a shift to a lower-tax government.
JT, GB did NOT do a "pensions raid". He reduced corp tax at the same time and the overall impact was £nil. So if you didn't have shares in a pension fund, you ended up rather better off.
VAT is entirely voluntary. I am not forced to pay a penny in it unless I want to buy something which is not zero rated. Admittedly it would be a fairly miserable existence but I can arrange my affairs so as to avoid paying any money whatsoever.
BE, you might as well argue that income tax is voluntary as you are not forced to earn more than the personal allowance. Learn to see VAT what it is - a tax on the gross profits of VAT-able businesses. From their point of view it is not voluntary at all.
If you argue that VAT is a mythical, voluntary tax on 'consumption' then Employer's NI is also a voluntary tax on 'consumption' of labour; and corporation tax is a voluntary tax because business will insist on trying to charge more for their outputs than they cost to produce. And so on.
I take the view that no tax is voluntary. It makes virtually no difference whether the tax is taken from production taxes, employment taxes, transaction taxes, property taxes or income taxes. The tax target only affects the balance of winners and losers to the extent of whose pocket is raided first. Essentially every pound taken in taxation and wasted by government is a pound less in the free economy and society is a pound poorer.
W42, but the rent that people pay is also a kind of tax, it is merely privately collected tax. So the landlord spends it all on himself and produces nothing, clearly a drain on the economy.
For sure, our current government spends a quarter of all tax revenues on itself, but three-quarters goes on stuff which benefits people generally.
So even at current levels of waste, taxes on the rental value of land tend to boost the economy: most of it is spent on good stuff and landlords have to go out and find a proper productive job.
Do people really fall for this?
Unfortunately yes.
Did you notice the bit about the "freeze saving people £72" as well? Not many people will interpret that as "Mr Osborne has graciously decided not to grab another £72 next year".
MW I do actually think that. That is why people often choose not to work harder to earn more because they don't fancy paying the extra tax.
Of course we could all go back to paying virtually no tax if we went back to the middle ages and wouldn't that be fun!?
Nobody forces me to work to earn to spend. I do it all voluntarily!
Oh and on a serious note if you think that paying tax is not voluntary look at the huge numbers of people who choose to be "economically inactive".
AC, BE, we are drifting way off topic. The point is that Georgie has frozen a not-so-bad tax and hiked the worst taxes by twenty times as much as the nominal "not increase" in the not-so-bad one.
I'm not sure it's anything to do with particular taxes being voluntary or involuntary. For most people income tax is deducted via PAYE so they never actually get their hands on the cash. They might moan about how much is deducted but the fact remains that they never receive it.
VAT and Council Tax, on the other hand, are paid out of money the punter has actually had in his bank account or his wallet. As such it is perceived in a different way by the taxpayer - instead of being withheld it is taken from him.
VAT applies to a fair bit of what we buy but is taken by way of a small sum here and a small sum there. Council tax bills arrive in March claiming one of the largest single items of annual expenditure (even if it is paid monthly by direct debit it is still a single bill) and it is all tax.
I believe this is why people moan so much about Council Tax and why Georgie saw political capital in highlighting it.
The problem still remains that government is overspending by about 25%, although I've almost given up hope of any of our politicians addressing that issue openly and honestly.
I wonder what the effect would be on the public's perception of VAT, if it was charged separately at the till, as it is in the States (and all shelf prices do not include it): "That will be £56.20, sir, plus £11.24 tax".
TFB, yes, that might explain people's entirely irrational behaviour, but you are quite wrong on VAT. It raises four times as much as council tax and people do NOT notice it (whether they bear it as producers or as consumers is a separate topic).
As evidenced by the fact that Georgie expects a pat on the back for an £800 million council tax not-increase and got away with a £20 billion actual hike in VAT and NIC.
B, the way to do it would be to raise assessments on each individual at the year end, and charge them 1/6 of all their income unless they can prove they didn't spend it on VAT-able stuff.
TFB, as an afterthought, that is why a cunning way of collecting LVT would be to deduct variable rate income tax from people's salaries, which magically comes out at exactly = to their LVT bill.
I wondered if Chris Leslie's assumption is right. He's saying that "a couple with children" was spending £18,000 pa, plus VAT at 17.5%, p/a - £21,150 - on VATable goods and services. That is what would show a £450 increase in expenditure due to the rate going up to 20%. A relatively affluent couple, I'd say.
But no need to spend too long researching. Here's a likely source, from last December.
"The New Year’s rise in VAT will cost the average middle-class family up to £448 a year, a report by a leading economist claims today
...
In a report for data management firm Acxiom, HSBC’s chief economist Dennis Turner describes the policy as ‘ambitious, not to mention risky’.
He said the VAT rise would see the average family lose £225 a year in spending power.
But for middle-class families, the average loss could be almost double that figure."
http://www.dailymail.co.uk/news/article-1335989/Middle-class-face-450-VAT-rise-20-rate-slash-spending-power-families.html
Rgds
Will
And the best thing is that the £72 goes to Roman Abramovich as well as the minimum wage working sod...
JM, funnily enough, Andrew Marr and Jon Snow both said the same thing to David C in recent interviews: they put it to him that Council Tax cuts were actually tax breaks for the wealthy (which is an extreme view but not entirely without foundation).
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